What Is The Business Logic Driving Free Web Services Such As Twitter?

2010-02-06 at 03:46 am hugege

With millions already invested in Twitter, and no profit to date, and I don’t know of any existing revenue stream, what is their business logic? Why would venture capital flow toward Twitter, instead of away from it? This question applies to other free web start ups as well. Any insight into the long term strategy or viability of these free web sites is appreciated.

2 Responses to “What Is The Business Logic Driving Free Web Services Such As Twitter?”

I must admit that this is just a guess. And with that said I’m also guessing that there could be over 1000 reasons that Twitter approaches the market the way it does with great success.
Okay, so Twitter makes no money (yeah right) why invest in it.
During a recent error on Twitters part numerous people lost their accounts including @BodyByChocolate (ME!). Fortunately Twitter quickly realized what had happened and Tweeted their apology along with a clear statement that TweetLater’s auto DM process had nothing to do with the issues we were experiencing.
With TweetLater there is a free and paid version to work with. The paid version is very nice and worth every penny. While I can’t say that Twitter owns TweetLater, is it not possible that there is some type of backend advertising that the founders of Twitter do without us realizing it? Done right, Twitter would stand to make an aweful lot of money.
Or, how about this?
Twitter aligns itself to be a charity which gives back to the community. Do you know how much money charities can make? Then if they have the above tied in too Twitter would be looking very nice while being very free.
I can’t guarantee any of the above are actually true, just good reasons for why they do what they do.
The Body By Chocolate Man
TWITTER: http://twitter.com/BodyByChocolate
WEBSITE: http://bodybychocolates.com/xo/gs/enter.…

Hi,
Usually the thinking behind this type of business is that the initial phase of their business is to attract a massive user base by offering their service for free.
Once they have a substantial user base, that’s a valuable asset that they’ll look to monetize.
In the case of Twitter, they’ve spent the time so far building their brand and increasing the user base so that they can then move over to a monetization model.
Recently there have been suggestions that Twitter will start charging companies for new functions designed to put them in more effective touch with their customers.
Here’s what one of the Twitter guys said:
“However, it’s important to note that whatever we come up with, Twitter will remain free to use by everyone—individuals, companies, celebrities, etc. What we’re thinking about is adding value in places where we are already seeing traction, not imposing fees on existing services. We are still very early in the idea stage and we don’t have anything to share just yet despite a recent surge in speculation. When we do, we’ll be sure to let you know.”
So, it looks like they won’t charge for the existing features, but will add others that are monetized as they see opportunities.
I use Twitter and make a decent income from it as it is, so I’m sure they’re going to be around for a while and make some good money from it. They’ve had $55million in funding so their plans are likely to be big as far as getting that back and returning a profit.
Andyhttp://www.turntoandy.com/blog/